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The Automobile Industry vs Coronavirus.
The Automobile Industry vs Coronavirus.
Hey guys,
There're not too many upgrades these days, maybe a Intruder 150 or Dominar 250 or so, but there're lots of updates and most of it is bad news. We're seeing an invisible virus ravag... but I guess, you already know that.
Let's collect some of the recent news here, relating to this virus.
1. Lockdown has affected dealers very adversely as you might've guessed. Dealers whose inventories are on loan (mostly short term), have asked for extensions. They now have a 10 day window to clear their BS4 stock, starting 14th, and things are looking grim as the customer isn't likely to rush to the showroom, even after the lockdown period.
2. Largely, the FY19-20 was an ok one, but the impact of the virus is likely to lead to a double digit Decline in the FY20-21, for the 2 wheeler market. The industry has to brace for this impact together. Operating margins will crash to around 11.5% from 14% or so. Suzuki even predicts a 2 year strain, situation is so unpredictable.
For some manufacturers, this March's sales have crashed up to 55% (TVS) compared to last year's March, despite that showrooms were open for most of the month.
3. BS4 vehicles remain unsold in varied numbers for different companies. Hero seems the most affected one, with around 1.5 Lakh unsold units (Rs. 10k discount on BS4 bikes and 15k on BS4 Scooters, as a result). Given a 8k increase in BS6 prices (due to Fuel injection in place of carburetor), the benefit would be around 18-23k for the customer who chooses a BS4 over a BS6 (Who wouldn't?). Exporting this inventory is also a choice companies have, and may be they've already exercised it.
The Supreme Court order, despite being a positive one, is not much of a relief either with huge inventories and tricky conditions.
However, the early launched BS6 vehicles have sold really well despite slowdown now, and they're past the 1 million mark, cars alone and bikes apart from this.
4. The auto industry is in a fix over BS6 pricing, which is likely to cause around 10% inflation in the industry. The price was always expected to increase, no doubt, and there was a little recession in the market too, but not many could've predicted the impact of this virus early on. The companies' suppliers and dealers are ensured full cooperation and early payments of dues.
Now, BS6 vehicles are expensive and the customers are.. not quite interested in personal transport, as against other areas of concern like food, healthcare, insurance, etc.
5. Automobile companies are not in dormant mode. They've given enhanced warranties, some of them extending the warranty for upto 3 months or so. Some of them are giving tips to maintain a parked vehicle, like start it and idle it for 15 minutes or so..
Some of these companies have been asked by Health ministry to make ventilators and N95 for ailing patients first, and then on, for precautionary use.
Copying a Hindi dialogue from the movie "Jab We Met" here...
"In other words, Apni to halat kharab hai, saddi to band baj chuki hai, isse bura aur kuch nahi ho sakta, ab sirf accha ho sakta hai... aur hoga!"
(We're really in bad shape, things can't go any worse than they already are, they can only be better now... and they will be!")
The good news you ask? Well, the environment is reported to be cleaner and clearer now. BS4 vehicles can be purchased for cheaper now, although for a small period only.
And for us, even the BS6 vehicles might get cheaper as we see shrinking margins for every party involved at all levels, right from the dealer uptill the component manufacturer (like Minda, Bosch, etc.). SIAM is bullish on the automobile sector recovery. There will be a tomorrow for sure.
The current price, even after discounts is not going to be BS4 level and its only a short run benefit though, it can't sustain in the long run, but hey, Corona is a short run affair too... Right? We're chained for now, in our own houses, but there will be a tomorrow, when we'll ride free again... Let's keep the hopes high...
Signing off,
S.
Hey guys,
There're not too many upgrades these days, maybe a Intruder 150 or Dominar 250 or so, but there're lots of updates and most of it is bad news. We're seeing an invisible virus ravag... but I guess, you already know that.
Let's collect some of the recent news here, relating to this virus.
1. Lockdown has affected dealers very adversely as you might've guessed. Dealers whose inventories are on loan (mostly short term), have asked for extensions. They now have a 10 day window to clear their BS4 stock, starting 14th, and things are looking grim as the customer isn't likely to rush to the showroom, even after the lockdown period.
2. Largely, the FY19-20 was an ok one, but the impact of the virus is likely to lead to a double digit Decline in the FY20-21, for the 2 wheeler market. The industry has to brace for this impact together. Operating margins will crash to around 11.5% from 14% or so. Suzuki even predicts a 2 year strain, situation is so unpredictable.
For some manufacturers, this March's sales have crashed up to 55% (TVS) compared to last year's March, despite that showrooms were open for most of the month.
3. BS4 vehicles remain unsold in varied numbers for different companies. Hero seems the most affected one, with around 1.5 Lakh unsold units (Rs. 10k discount on BS4 bikes and 15k on BS4 Scooters, as a result). Given a 8k increase in BS6 prices (due to Fuel injection in place of carburetor), the benefit would be around 18-23k for the customer who chooses a BS4 over a BS6 (Who wouldn't?). Exporting this inventory is also a choice companies have, and may be they've already exercised it.
The Supreme Court order, despite being a positive one, is not much of a relief either with huge inventories and tricky conditions.
However, the early launched BS6 vehicles have sold really well despite slowdown now, and they're past the 1 million mark, cars alone and bikes apart from this.
4. The auto industry is in a fix over BS6 pricing, which is likely to cause around 10% inflation in the industry. The price was always expected to increase, no doubt, and there was a little recession in the market too, but not many could've predicted the impact of this virus early on. The companies' suppliers and dealers are ensured full cooperation and early payments of dues.
Now, BS6 vehicles are expensive and the customers are.. not quite interested in personal transport, as against other areas of concern like food, healthcare, insurance, etc.
5. Automobile companies are not in dormant mode. They've given enhanced warranties, some of them extending the warranty for upto 3 months or so. Some of them are giving tips to maintain a parked vehicle, like start it and idle it for 15 minutes or so..
Some of these companies have been asked by Health ministry to make ventilators and N95 for ailing patients first, and then on, for precautionary use.
Copying a Hindi dialogue from the movie "Jab We Met" here...
"In other words, Apni to halat kharab hai, saddi to band baj chuki hai, isse bura aur kuch nahi ho sakta, ab sirf accha ho sakta hai... aur hoga!"
(We're really in bad shape, things can't go any worse than they already are, they can only be better now... and they will be!")
The good news you ask? Well, the environment is reported to be cleaner and clearer now. BS4 vehicles can be purchased for cheaper now, although for a small period only.
And for us, even the BS6 vehicles might get cheaper as we see shrinking margins for every party involved at all levels, right from the dealer uptill the component manufacturer (like Minda, Bosch, etc.). SIAM is bullish on the automobile sector recovery. There will be a tomorrow for sure.
The current price, even after discounts is not going to be BS4 level and its only a short run benefit though, it can't sustain in the long run, but hey, Corona is a short run affair too... Right? We're chained for now, in our own houses, but there will be a tomorrow, when we'll ride free again... Let's keep the hopes high...
Signing off,
S.
Even now, restarting the economy is the only choice.
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